2022 (11) TMI 934 - HC - Companies Law

Initiation of multiple proceedings by ROC under section 206(4) of The Companies Act 2013 in respect of the same alleged contraventions - submission of report on the inspection under section 208 of the Act - HELD THAT - A careful perusal of the provisions relating to inspection inquiry and investigation of companies under sections 206-210 of the Companies Act 2013 indicates that the sequential steps required to be taken by the ROC must be followed before the ROC submits the report in writing to the Central Government for further investigation into the affairs of the company if necessary. The stage of filing a report comes only after inspection of books of accounts or conducting inquiry under sections 206 and 207 of the Act. Section 210 is the culmination of this batch of provisions relating to inspection inquiry and investigation into the affairs of the company where the Central Government may investigate into the affairs of a company if it is of the opinion that it is necessary to do so and on fulfillment of the conditions under section 210(1)(a)-(c). The contention that the respondents are statutorily precluded from initiating a proceeding under section 206(4) after the impugned inquiry report dated 13th April 2021 is mis-reading the relevant provisions. Sections 206-210 of the Act do not contain a bar on the Registrar calling for information or conducting an inspection or inquiry if the Registrar comes across additional material warranting the second proceeding under section 206. The presumption that the impugned report dated 13th April 2021 should be stayed since a parallel inquiry has been initiated in July 2022 is not borne out from the relevant statutory provisions. It is also relevant to state that the provisions for inspection inquiry and investigation are distinct from sections 271-273 dealing with the circumstances in which a company may be wound up by the Tribunal. Section 273 in fact empowers the Tribunal not only to make an interim order but to pass any other orders as it may deem fit subject to the three provisos following section 273(1)(e) of the Act. This Court is hence not inclined to interfere with or interdict the impugned inquiry report dated 13th April 2021 - Application dismissed.

Issues:
1. Petition seeking injunction against Registrar of Companies and Regional Director from further steps in inquiry reports.
2. Interpretation of provisions under sections 206-210 of The Companies Act, 2013 regarding multiple proceedings by ROC.
3. Validity of initiating a separate proceeding under section 206(4) after an earlier inquiry report.
4. Jurisdiction of NCLT in winding up proceedings and its impact on ROC's actions.
5. Distinction between inspection, inquiry, and investigation provisions and winding up provisions.
6. Whether the Writ Court should intervene in the matter.

Analysis:
1. The petitioners sought an injunction against the Registrar of Companies and Regional Director to halt actions based on inquiry reports. They argued against multiple proceedings under section 206(4) of The Companies Act, 2013 for the same contraventions, citing a report dated 13th April, 2021, and subsequent actions. The petitioners claimed the ROC's actions were premature and outside the statutory framework.

2. The court analyzed sections 206-210 of the Act, emphasizing the sequential steps required before the ROC submits a report to the Central Government. It highlighted the necessity of following these steps, including inspection and inquiry, before initiating further investigations. The court stressed the importance of compliance with the statutory provisions by the respondents.

3. The respondents contended that a separate proceeding under section 206(4) was justified due to new financial irregularities discovered after the initial report. They argued that the winding up proceedings before the NCLT warranted additional actions by the ROC. The court deliberated on the statutory powers of the Tribunal and the need for separate proceedings based on new findings.

4. Considering the winding up proceedings before the NCLT, the court assessed the impact on the ROC's actions. It noted that the petitioners could contest the inquiry report during the winding up proceedings and that factual disputes regarding the timing of proceedings should be addressed in the appropriate statutory forum.

5. The court distinguished between provisions related to inspection, inquiry, and investigation under sections 206-210 and the winding up provisions under sections 271-273 of the Act. It highlighted the wide powers of the Tribunal in winding up matters and the petitioners' opportunity to address the inquiry report within the winding up proceedings.

6. Ultimately, the court declined to interfere with the impugned inquiry report dated 13th April, 2021. It directed the concerns raised by the petitioners to be addressed within the ongoing winding up proceedings. The court emphasized that the Writ Court was not the appropriate forum for resolving factual disputes and that the concerns should be dealt with in the statutory forum.

This detailed analysis of the judgment provides a comprehensive overview of the issues raised and the court's reasoning in addressing each concern.

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